Is the ‘sharing economy’, in its current form, just a capitalist con?

SUMMARY:

The sharing economy has been touted as the next revolution of the web, where people sell under utilised resources for individual personal profit. But is it a con?

 

Smartphone with cloud of application icons in consumer handA piece in the Guardian this weekend on the sharing economy, which was heavily shared amongst my friends on Facebook, took a look at how a reporter could get through the day using ‘as-a-service’ apps to fulfil all of his needs.

The journalist used Uber to get around, People Per Hour to find a freelancer to write a story for him, Priv to get some beauty treatment done, Jinn to get some food delivered and even Tinder and Grindr to find some human interaction.

Whilst the piece in question was a tongue-in-cheek look at how your smartphone can provide you with pretty much anything you need on demand, it also demonstrated the growing popularity of the ‘sharing economy’.

Or as I like to now call it, the sharing economy con.

The idea of the sharing economy has emerged following the widespread availability of smartphones, the pervasive access to mobile broadband and the ability the internet holds to connect different people with different needs and capabilities in real-time.

However, when the sharing economy emerged as a concept, it was touted as a new revolution that would flatten out hierarchical structures, give people with assets the ability to provide services and goods to other people that needed them, put the power into the hands of a dynamic community, and all the while improve our green footprint through the utilisation of unused assets.

Unfortunately, from what I can tell, the sharing economy is instead morphing into a new form of web-based capitalist silos (what we in the digital world like to call platforms) that have been able to take advantage of external economic turmoil to create new monopoly-led business models and generate new revenues.

This is being done in a way that makes people think that what they’re getting is a ‘good deal’, whilst sharing economy apps continue to push regulatory boundaries, thanks to an increasingly obvious ‘grey area’ in US and European law, and continues to make people and services a cheap commodity for those better off than them.

It’s all still about scale, shareholders and investors – you can pretty much forget the ‘sharing’ ideals.

Let's share? SHOW ME THE MONEY!!
Let’s share? SHOW ME THE MONEY!!

That’s not to say that this is necessarily ‘bad’, but let’s call a spade a spade and deal with what is actually happening in the market. From my point of view, people have become so disillusioned with the current system that they actually think that working for a platform that takes a cut of their service or asset rental, for doing nothing more than providing the platform, is a good deal.

Before I go on, I feel the need to clarify that I do actively partake in this ‘sharing economy’. I’m a regular user of Uber and have used Airbnb in the past, so I realise that this may come across as somewhat hypocritical.

But from the buyer’s perspective, these apps and services have transformed and disrupted markets. I don’t use Uber or Airbnb out of any sort of brand loyalty, I use them because they provide an infinitely more efficient service than any of the legacy players in their respective markets, at a much lower cost point.

I use them for completely selfish purposes – namely cost and ease. And this is despite all the negative press attention that each has received. Which is part of the problem. People are typically okay with using a service that sits in an ethical ‘grey’ area, if it is cheaper and more convenient. And has some nice branding wrapped around it.

I won’t say it’s the equivalent of dodgy supply chains, but you get the drift. I just hope that whilst we are all consuming our cheap and easy services, we realise the impact of the structures that we are creating around us.

It’s just not ‘sharing’

To my previous point, this isn’t sharing. These are platforms that are hoping to create new monopolies on the web, realising that people out there need to make some extra cash thanks to falling wages and increased unemployment, in a post-2008 financial crisis world.

An article on the Institute of Network Cultures summed up my sentiments exactly, where it claims that whilst the sharing economy initially proposed an idea of communities trading across a flatter structure, with higher mark-ups that extract value at a personal level, it instead has simply evolved into business as usual. The writer of the article, Sebastian Olma, said:

It should be clear that understanding the “sharing economy” in terms of platform capitalism is by no means a matter of linguistic nitpicking. Calling this crucial development by its proper name is an important step towards a more sober assessment of the claims made by the proponents of “sharing.”

Take, for instance, the notion that everyone benefits from the disruptive force of the “sharing economy” because it cuts out the middleman. Sharing models, the argument goes, facilitate a more direct exchange between economic agents, thus eliminating the inefficient middle layers and making market exchange simpler and fairer.

While it is absolutely true that internet marketplaces and digital platforms can reduce transaction costs, the claim that they cut out the middleman is pure fantasy. As one blogger puts it: Sure, many of the old middlemen and retailers disappear but only to be replaced by much more powerful gatekeepers.

And as I hinted at earlier, it has been perceived that the reason that people are joining this ‘new type’ of economy is because the old type of economy is failing them – low unemployment and falling wages has meant that people have jumped at the opportunity to make some extra cash out of assets they already own e.g. their car or their house.

However, as Janelle Orsi highlights in an article entitled ‘The sharing economy just got real’, this gives these new platforms new possibilities to push the boundaries of what had previously been legally impossible; all because responsibility often falls on the sharing community, not the platform. She said:

Uber is the poster-child for the sharing economy
Uber is the poster-child for the sharing economy

On one hand, these companies open economic doors. In times of high unemployment, it is comforting to know they are there. I know of people who, right now, simply couldn’t make ends meet without Airbnb or TaskRabbit.

But it’s dangerous to take comfort in the simple fact that these companies create new opportunities to make a living. It’s a double-edged sword, because the shareholders of these companies are getting rich because good stable jobs are otherwise scarce in this economy.

During times of high unemployment, our streets could become flooded with Lyft drivers. If competition among drivers grows, it won’t matter much to Lyft, but it might make drivers work longer hours or drive across town for the sole purpose of giving a quick ride. To the extent that they become economically dependent on Lyft, drivers are vulnerable to working under less-than-ideal conditions.

This is the whole reason we have employment laws. The Fair Labor Standards Act was passed in order to temper the harms of situations where workers become economically dependent on employers who control working conditions and profit from the work. It’s one big, dangerous combination. An employer stands to make more money if the worker is paid less, if the worker works faster, if the worker skips lunch, and so on. The current lawsuits will put a spotlight on this question: What is to stop all of that from happening with Lyft and Über?

And this leads us to one of the most critical points of all – whilst these platforms appear to be helping society at large, convincing us that we are taking the power of earning into our own hands, via this new wonderful mechanism known as the ‘sharing economy’, what it could be doing is quickly breaking down what has protected us as workers within these capitalist, money making structures.

In a way, in the past we have made an exchange, whereby we accepted the capitalist idea of ‘big business’ because we thought it gave us benefits in terms of employment. A job market with endless earning opportunities and securities. However, what the sharing economy is arguably doing is giving us ‘big business’ without some of the employment benefits.

This is a point highlighted by Arthur De Grave in Our World. He wrote:

This point is the most controversial of all. Sharing economy services could accelerate the phenomenon of job destruction. For people like Evgeny Morozov, the so-called sharing economy is nothing but the logical continuation of the digital economy and crowdsourcing. Despite all those nice speeches about empowerment and entrepreneurship, people in the sharing economy are nothing but an extreme precariat (they just don’t know it yet). And they may actually have a point. Do you remember last time the economic system went haywire? It was in the early 70s, when the oil price suddenly rose. This is what happened:

“Real wages started stagnating while productivity per capita continued to increase. To keep the system running, a new deal had to be made: people would no longer be paid according to the value they actually produced, but they would get — seemingly — unlimited access to credit. This new deal had a name: debt. In the post-2008 world, we all know this deal is now null and void.

“One cannot help but notice one interesting fact: while allowing wages to stagnate and inequalities to skyrocket, the neo-liberal revolution has left the basic structures of welfare — all those perks associated to wage labor such as social security and healthcare — relatively untouched. These are precisely the benefits Lyft drivers or Airbnb hosts will never have: they are not employees. In a way, these services are based on crowdsourced solutions. Is the sharing economy truly about that? As Morozov puts it, does the sharing economy “undermine the workers’ rights”? Most probably. Will it destroy jobs? Of course it will!

My take

Despite all of this, perhaps we should take solace in the fact that this is still very early days for the sharing economy. In fact, I’d argue that what we have seen thus far is no-where near any sort of idea of the sharing economy. What we have at the moment is VC-backed platforms, with shareholders, that are taking advantage of economic factors that mean that people are willing to connect and trade in a way that opens them up to certain risks, without much value given in return.

I’m sure some of the companies will come back to me and say ‘X’ earns 10 times more than he/she earned in their previous job using the sharing economy. My response: great, but just because you’re better than what’s out there already, doesn’t mean it’s a true ‘sharing’ model that delivers more value to all.

What will the future hold?
What will the future hold?

I think what will be interesting is if we get a sharing platform that actually makes the community that is trading on it stakeholders – a cooperative partnership. I’m not sure how this would develop, or whether it would work, but if a community of people were trading and sharing on a platform, based on the value delivered to the greater community, to me that fulfils the true ideals of the sharing economy.

But we are a long way off that.

I’m going to finish with a conclusion drawn by Juliet Schor, a professor of sociology at Boston College, who claims that we shouldn’t give up hope just yet, but we need to be wary of the ‘business as usual’ approach we are getting at the moment. She said:

So what are we to make of the sharing economy? There is little doubt that the prosharing discourse is blind to the dark side of these innovations. At the same time, the critics are too cynical. There is potential in this sector for creating new businesses that allocate value more fairly, that are more democratically organized, that reduce eco-footprints, and that can bring people together in new ways. That is why there has been so much excitement about the sharing economy. The emergence of P2P communities that share goods, space, and labor services can be the foundation of a new household model in which people are less dependent on employers and more able to diversify their access to income, goods, and services.

But the early stage goodwill from the big platforms will dissipate as they become incorporated into the business-as-usual economy. We are at a critical juncture in which users’ organizing for fair treatment, demands for eco-accountability, and attention to whether human connections are strengthened through these technologies can make a critical difference in realizing the potential of the sharing model. There is an enormous amount of new economic value being created in this space. It is imperative that it flow equitably to all participants. After all, that is what we ordinarily call sharing.

    Comments are closed.

    1. says:

      Aaaaahhhh…the impetuosity of youth. Almost socialist in the takedown Derek 😉 – but more seriously, Certify is reporting a jump in Uber based taxi claims, pegging it at 5% of business expense cab fare claims. Hardly a magic number of itself but a HUGE number when you think about the numerous cab services operating in the US alone. That in itself gives credence to your platform argument methinks. 

      1. says:

        Definitely Socialist, Den.What I hear in this article is a view that, Never mind that these people can’t get jobs at all and are saying they wouldn’t survive without these services, they’re being exploited so we have to take steps and the people giving them these jobs are bad.  Never mind the existing services are bad enough that even the writer prefers these terrible new exploitive services, this sharing economy is bad.  Perhaps best of all was the idea that “doing nothing more than providing the platform” is somehow not adding value.  Perhaps as a budding Socialist, Derek hasn’t had the pleasure of being a capitalist very much.   The number 1 most difficult thing for any capitalist to accomplish is exactly that thing which he has labeled a worthless platform:  marketing.Namely, the acquisition of customers for these poor exploited masses.  You know, the people who actually have money to pay for their services.  How many would-be capitalists have started businesses without concern for how they were going to get customers and gone on to fail miserably as a result?But then, I’m sure you’re scratching your head and wondering, “Why does he say Socialist like it’s a bad thing?”Let’s ban all these new services from doing business and return those who were earning wages for them to waiting for the “Real” Economy to reawaken and bestow them with fabulous jobs.  Good idea.

        1. says:

          Ouch – that’s gotta hurt 😉

          1. Derek du Preez says:

            Not really Den. What I find interesting is that the only complaints I’ve had about this article are from those working in the technology industry itself – mostly in the Silicon Valley bubble. Meanwhile a bunch of people on Twitter, mostly cab drivers, ex-Uber drivers, are sharing this like mad in complete agreement. That says a lot to me. Equally, whilst the article may come across like I’m some sort of raving socialist, I’d just like to clarify that this isn’t the case. However, what I find interesting is that most people counter my argument with – “well the system was crap anyway” or “at least these people have jobs now”. Which are both relevant points. However, what is interesting, is that these companies are able to offer these people ‘jobs’ or a way to work without the normal protections in place – and for some people that is a trade they are willing to make, for some reason. To me that hints at failings in the existing system and some level of desperation in the jobs market. What it doesn’t suggest is this is the golden model we have all been waiting for. *Very* easy to be derivative of the points made of the above article, given the success of brands like Uber. 

    2. says:

      If only of historical interest, you might enjoy a similar article from just about a year ago, called “The Sharing Economy: the End of the Summer of Love?”http://trustedadvisor.com/trustmatters/sharing-economy-end-summer-love

    3. says:

      So true! This is why I created letsdutch.com its a community marketplace to share, plan, and pay for group experiences with others. You can host, or search for anything you want to share. Going “dutch” on a grand scale, and splitting the cost of more than just dinner out. Time to start sharing the cost of this “sharing economy”